The paper "Price Discrimination by Amazon" is a wonderful example of a case study on business. Pricing is a critical decision for any multinational company. With emerging technologies, pricing structures have become very complex and most difficult. Stiff competition and changing consumers' behaviors are core business components that determine the type of price structure the company will adopt. This paper examines the economic rationale for price discrimination by Amazon Company. The first section of the paper presents the basic concepts and major types of price discrimination. Additionally, the paper discusses the economic conditions that make sellers tag different prices for their customers.
Moreover, the paper critically analyzes why Amazon Company charges its clients differently. Price Discrimination Concept (economic theory)Some factors stimulate sellers to price discrimination against their customers. Firstly, if the demand for the commodity is high in one market segment compared to the other, the seller has a tendency of having different product charges in these markets (Kokolakis, et al. , 2012). Secondly, price discrimination arises when the seller wants to stimulate buyers to purchase goods in large quantities. In this aspect, customers buying large quantity products they pay less compared to buyers purchasing in small units.
Finally, price discrimination arises if the seller operates in diverse market segments with different economic trends. Thereby, customers from a stable financial market dealer charge them higher compared to clients from market segments with a small economy. The advantageous factor of having a price discrimination technique in the market is that the firm will increase gross profit by actually balancing the supply, demand, and prices (Kokolakis, et al. , 2012). However, price discrimination might limit the company from competing because consumers might switch to other related products in the market quickly.
According to Such et al. (2014), most customers believe that price discrimination is illegal and unfair. If buyers discover that the company has been discriminating against clients regarding prices, they switch to competitors' products.
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